THE DISTRICT'S speculation tax had a fatal

collision with the political process this week. At the moment there is much talk about how, after a lobbying campaign by realtors, four D.C. council members shifted their votes on the tax and killed it. But what has actually been done? In the opinion of council chairman Arrington Dixon, getting rid of the tax makes little difference because the tax was ineffective. Other council members argue that the need for any tax to stop speculation is past because speculation in the city has stopped.

The speculation tax was intended to halt the displacement of poor people and the disruption of neighborhoods that occur when properties are sold, renovated and then quickly re-sold at much higher prices--prices that further unsettle neighborhoods by ballooning assessments of nearby properties. There was a tacit racial factor to the tax, as well, in that the neigborhoods vulnerable to speculation were largely black while the developers and their customers were seen by some as predominantly white. A few years ago, speculation and its attendant "gentrification" of rundown neighborhoods was seen as a tidal wave approaching the city, but that wave never arrived--at least not on the large scale once anticipated. The tax, however, has remained on the books.

What has it done? Even in relation to the limited speculation that has taken place, the effect of the tax has been suspect. As a result of several exemptions for certain types of buyers and sellers--such as people who had to sell a house quickly as a result of a new job--the tax was easy to escape. And because enforcement was practically non-existent, it was also easy for speculators to ignore it and take the small risk of getting caught.

The supporters of the tax argue that the bill cannot be measured by the small amount of money it has generated. They say the tax has succeeded in its purpose when it acts as a deterrent and no tax has to be imposed on a property sale. This stand reveals the basic problem with the speculation tax: it is not only a tax but also social legislation. Yet, as a tax it has failed by not generating revenue, and as social policy it has failed by not deterring speculation.

If the speculation tax is introduced in the council again, as it is expected to be, the council might consider modeling it on the capital gains tax. The tax would be levied on all property sales that occur within one year of the last sale. That simple law would slow speculation and net tax dollars for the treasury. The council need only consider this approach if it is convinced that the speculation tax is a good way for the city to get money. As social policy, the tax would still be inadequate because the city may no longer be under siege from speculators, and it may be in the city's best interest to encourage realtors to go into deteriorating neighborhoods and improve the housing stock. In any case, the speculation tax that was killed by the council this week deserved to die.